EMPLOYEE BENEFITS
Benefits programmes becoming more flexible
Businesses are giving employees a wider choice of benefits to better reflect their changing personal needs, and they are introducing a more flexible approach to provision. These are the main themes that shone through in a fascinating new survey by pay consultancy Towers Perrin.
Widening choice
Entitled The benefits package for the future , the survey is based on the benefits structure in 169 companies. Its main conclusion is that companies strongly believe that benefit packages should differentiate between employees, reflect employees personal tolerance of risk and be integrated with other components of total reward.
Says Towers Perrin:
It is clear that benefit programmes continue to evolve, both in terms of the breadth of benefits available to employees and the way that benefits are delivered. The trend to offer employees more choice continues, and companies are making changes to the way that benefits are delivered to facilitate this. Specifically, companies are introducing flexible benefits programmes at an ever greater rate than before.
But while many organisations have overhauled their pay systems, what is striking is that the vast majority of organisations have yet to overhaul other parts of their total reward package. The most prevalent approach to managing benefits in the UK is still the standard fixed package. Moreover statistics gathered by Towers Perrin suggest that traditional benefits are not a significant factor in recruitment, retention and motivation of most employees.
As the report observes: Given the amount that companies spend on benefits (frequently between 30% and 50% of salary costs), this could mean that there continues to be a significant opportunity to improve the value to the business of that spend.
Move away from status-driven culture
But Helen Freeman, a principal in the benefit strategy practice at Towers Perrin who led the research, is in no doubt that the clear message is that companies are, albeit tentatively, seeking to move away from a status-driven culture. Whilst it continues to be true that executives and senior managers are more likely to be provided with flexible benefits, in those organisations planning to increase flexibility, more and more non-managerial employees — not simply the higher echelons — will soon be able to select from a range of benefits.
As part of this trend, employers are moving from high security/low employee risk to encouraging greater personal responsibility.
Total reward
One idea, which is common in the USA and gaining ground over here, is the total reward approach. This envisage financial reward (base salary, incentives and share schemes) as just one element of the total reward package, together with benefits, meaningful job content, opportunities for personal development, and a good working environment.
A central finding of the Towers Perrin research is that companies are increasingly taking a much broader approach to benefits and are considering them within the context of total reward strategies.
As Freeman points out, for benefits programmes to be most effective, they should not be considered in isolation from other elements of total reward. It is only when all of the elements of reward strategies (or total rewards) are considered holistically, and in line with business and human resource strategies, that the total spend on employees can deliver most value to the business, she says.
Additional benefits
The 169-company survey by Towers Perrin provides key empirical evidence of existing additional benefit practices and pointers towards planned changes. It highlights graphically the bewildering array of programmes that are now offered by UK organisations.
Gone are the days of a straightforward, standard package of benefits. Pushed by a desire to create a culture of greater employee responsibility, companies have increasingly been adopting a much more complex, modern structure of benefits — including elements such as annual health screen, car insurance and accident insurance — frequently on a voluntary, employee-pay-all basis or through a flex plan.
Key findings of Towers Perrin’ s benefit research
| Fixed benefits programme |
|
| A traditional benefits programme with little or no choice between benefits is still the most extensive form of package in the UK. |
|
| Flexible benefits |
|
| Companies are planning to make their benefit provision more flexible in order to suit employee needs, enhance appreciation of benefits and assist recruitment and retention. |
|
| Flex |
|
| More formal flex schemes — where employees are given the freedom to trade benefits that are part of a cafeteria-style menu of benefits — remain far from universal, but they are the most popular choice for the future. |
|
| Additional benefits |
|
| Some organisations are introducing a host of new benefits to meet staff needs, often on a voluntary, employee-pay-all basis, where the employer uses its bulk purchasing power to obtain more favourable terms for employees than they could obtain individually. |
|
| Communication |
|
| One emerging communication tool used by employers to publicise their benefits more effectively is the total remuneration statement. This provides employees with a single personalised document that outlines the value of pay and benefits. Some are using HR intranets. |
|
A final word from Towers Perrin
The benefits package in the future will, in contrast, be flexible, reflect employees’ own tolerance of risk and allow employee to determine what is right for them. It will be performance-related and managed in an integrated way with other components of reward.
This research shows that traditional benefit programmes are not a significant factor in the recruitment, retention and motivation of most employees, nor do they elicit high levels of awareness, understanding or appreciation.
Survey details
| Title? | The benefits package for the future |
| What is the purpose of the survey? | To examine the evolution of benefit programmes in the UK. |
| What is the survey sample? | 169 organisation spread across 15 industrial sectors, employing aggregate workforce of around two million. List of participants included. |
| How often is the survey published? | Biennial — report is fifth in series that started in 1992. |
| How long is the report? | 28 pages. |
| What is the price? | Free. |
|
|
|
| How is the information collected? | Based on questionnaire returns from HR professionals. |
| What information is collected? | Survey focuses on
|
| How are the results published? | Includes comparisons with previous surveys. Much of the information is presented in tabular and graphical form with concise analysis drawing on the statistical data. |
| Where can I get further information? | Helen Freeman, principal, Towers Perrin, Castlewood House, 77— 91 New Oxford Street, London WC1A 1PX. |
| Telephone | 020 7379 4411 |
| Web site |